Question: You are considering the replacement of an old machine that has a current book value of $7,000 and a market value of $9,000. The old machine is being depreciated to a salvage value of $2,000 at a rate of $1,000 per year over the next five years. The new machine will cost $100,000 and will last five years, at which time it can be sold for $15,000. It is in the three-year MACRS class (rates are 33%, 45%, 15%, and 7%). The machine will increase sales by $5,000, and operating expenses will fall $20,000 per year. The new machine will allow the firm to decrease inventory by $2,000. The firm's tax rate is 40%. Show the cash flows for each period.